Cycles & Comparisons : New York City's Office Building Market Is Healthy, With Far Fewer Vacancies Than in Los Angeles.

NEW YORK — Take Century City's skyline, multiply it 40 times over, and plop it down on a rectangular plot of ground measuring roughly 11 square miles.

That's Manhattan--Los Angeles-East--the place "that'll be a great city, if they ever finish it." And the comparisons and contrasts . . . the love/hate relationship between the two great urban centers that are the financial centers of their respective coasts . . . are inevitable.

The Los Angeles office market, which the nationwide real estate leasing, sales and consulting firm of Julien J. Studley Inc., defines as the 17-mile area between downtown Los Angeles and the ocean on the west, and between Wilshire Boulevard as the axis, out to Ventura Boulevard in the San Fernando Valley, sprawls over about 100 square miles and, in terms of vacancy rates, has had happier days than it is now seeing.

Market-wide, according to Howard D. Sadowsky, senior vice president, vacancies average about 13% to 14%, "but from a low of about 6% to 7% in the Westwood area, to about 15% to 16% downtown, and perhaps as high as 17% in the Los Angeles International Airport area."

The continually surprising Manhattan office market, with almost twice as much office space as Los Angeles (320 million square feet versus 180 million) crammed into a tenth of the space, has an overall vacancy average of 7 1/2%. But in only one area (the downtown Battery market) does the vacancy rate, 14.7%, approach Los Angeles's overall average.

Old, established areas, such as Midtown West, with a vacancy rate of 3.1%, and the Plaza District, anchored on the west by the Plaza Hotel and extending to the East River, with a vacancy rate of 4.2%, remain as tightly compacted as a number 11 foot in a size 9 sock.

"Los Angeles, admittedly, has gone through the wringer," Stephen Siegel, chairman of the board of Cushman & Wakefield, the national full-service real estate firm, told the The Times in a recent interview in the firm's 6th Avenue office here, "but I'm far more optimistic about it than I am, say, about Houston or Denver.

"Marketplaces like those two are industry-dependent--and, in their cases, sole industries, and their health will have a far slower recovery than Los Angeles will have.

"While the vacancy rate in Los Angeles is high on a percentage basis, it, in terms of square footage, is nowhere near either Houston or Denver. Los Angeles is a broad-based market, largely service-related, and we see Los Angeles back to full health in about three years. With both Denver and Houston, I think we're looking at five to eight years, minimum."

Constantly tearing down the old and replacing them with even taller, more modern structures--"I would guess that some of the office buildings you see going up right now are fifth generation buildings on the same site," Siegel added--New York City's dynamism seems to baffle even Cushman & Wakefield's chief executive officer.

"Declining interest rates, inflation staying totally in check in about the 3% range and a steady, healthy, sort of business environment are certainly part of it," he added.

"But then, we've also had landlords here seeing the steady absorption of office space the past couple of years, and they've become a little less aggressive in their development. As a result we don't have the sort of overbuilding that characterized the late '70s and early '80s.

"We've got, roughly, a 7% vacancy, Midtown, and we don't have an exorbitant amount of space coming on-stream in 1986 that would transcend the natural absorption. Even with a slowing of growth, we wouldn't expect to see more than a 2% increase in the vacancy rate."

Construction financing rates in Manhattan are in the 10 5/8% to 11% range "and some builders are optimistically projecting rates under 10% before the year is out," Siegel said.

"But I guess most of the vitality here is in line with what our own economists tell us--that we're now in the best times we have ever had, and that the American economy is healthier, as it relates to the rest of the world, than it has ever been."

It's the sort of global health that is increasingly attracting foreign money both to Manhattan and to Southern California.

"Japanese investors," Siegel said, "have historically stuck pretty well to the West Coast, but now, from a high visibility and recognition standpoint, it's New York. Certainly, for them there's nothing in between."

As a nationwide factor in the commercial real estate market, according to Kevin Haggarty, financial services director for Cushman & Wakefield, "about $12 billion came into the country in 1985, and it's a trend that began in about 1984 with an infusion of about $6 billion to $7 billion, and it really started taking off in 1985. And about one-half of this money is Asian, primarily Japanese. There's still a panache about New York that's almost irresistible to foreign investors."